Articles Understanding Your IRA Options

December 31, 2018

Individual Retirement Accounts (IRAs) are designated retirement savings accounts that allow you to set aside money and offer tax advantages on those funds. Several different types of IRAs exist, and they vary based on factors like types of contributions, tax advantages, income requirements and limits, age limits for contributions, and withdrawals. The main difference between them is when you pay income taxes on your contributions to the plan.

Navy Federal offers 3 types of IRAs: Traditional, Roth and Simplified Employee Pensions (SEPs). You can choose to have just one, or you can utilize a mix of these accounts depending on your financial situation, employment status or personal preference. Traditional and SEP IRAs offer tax deductions for contributions, while Roth IRAs allow you to grow earnings tax-free. With Traditional and SEP IRAs, you pay taxes when you withdraw the money in the retirement plan. With a Roth IRA, you pay taxes at the time you contribute, but the eventual distribution is tax-free as long as you meet certain requirements. Here's a more in-depth look at how these 3 IRAs compare:

Traditional IRA

These potentially tax-deferred retirement plans allow you to avoid paying taxes on contributions and earnings until you withdraw. Both deductible contributions and earnings are then taxed at your regular income tax rate.

Contributions can be made as long as you have earned income and you're below the age of 70½ in the tax year the contributions are made.

Simplified Employee Pension (SEP) IRA

SEPs allow businesses and self-employed individuals to contribute to retirement plans for themselves and their employees. Available for all business types, SEPs allow both employers and employees to contribute to the account.

SEPs allow tax-deferred contributions. A required minimum distribution is enforced at age 70½.

Navy Federal Credit Union is federally insured by the National Credit Union Administration.

Nondeposit investment and insurance products are offered through Navy Federal Financial Group LLC (NFFG) and through its subsidiary, Navy Federal Brokerage Services, LLC (NFBS), a member of FINRA/SIPC and an SEC registered investment advisory firm. Brokerage and advisory products are offered through NFBS. These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of the credit union, are not offered, recommended, sanctioned, or encouraged by the federal government, and may involve investment risk, including possible loss of principal. Products may be offered by an employee who serves both functions of accepting member deposits and selling nondeposit investment and insurance products. 1-877-221-8108. Trust Services available through MEMBERS Trust Company. 1-855-358-7878.

Investors should carefully consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. This and other information about municipal fund securities is available in the issuer's official statement which can be obtained directly from the issuer, or if distributed through a broker dealer, may be obtained from a financial adviser, and should be read carefully before investing.

An investor should consider, before investing, whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.

If a municipal fund security describes one or more of their investment options as having the characteristics of a money market fund, it is important to know that an investment in the security is not insured or guaranteed by the FDIC or any other government agency (unless such guarantee is specifically provided by or on behalf of such issuer) and, if the security is held out as maintaining a stable net asset value, that although the issuer seeks to preserve the value of the investment at $1.00 per share or such other applicable fixed share price, it is possible to lose money by investing in the security.